Claim for settlement money after an apartment security transfer

Introduction

There are cases where people urgently need money and provide their apartment or real estate as collateral and borrow money. If the debt is not repaid by the due date, the creditor exercises the security right. In this process, if the creditor completely takes ownership of the real estate, does the debtor lose everything?

In particular, if the creditor evaluates the value of the collateral real estate lower than it actually is, inflates the debt amount, and claims that there is no money to return (settlement money), the debtor can be in a very unfair situation.

Today, through a successful case in which, after a 'transfer for security' contract, the creditor transferred ownership of the real estate, but with the assistance of attorney Joo Youngjae of Saeyeoul Law Firm, the client received the legitimate settlement money of 105,000,000 Korean won, we will examine in detail the concepts of transfer for security and settlement money.

What are 'transfer for security' and 'settlement money'?

Transfer for security is a non-typical security system in which, to secure a debt, the debtor transfers ownership of the debtor's real estate to the creditor. If the debt is repaid, the debtor gets the ownership back; if not, the creditor exercises the security right to satisfy the claim.

At this time, the Act on Registration of Credit Guarantee (가등기담보 등에 관한 법률) (hereafter 'the Registration Security Act') stipulates that the creditor must go through strict procedures to acquire ownership of the real estate (settlement by attribution) by exercising the security right.

After the due date of the claim, the creditor must notify the debtor of the assessed value of the collateral real estate and the amount of the claim (article 3 of the Registration Security Act). And only after paying the debtor the amount obtained by subtracting the claim amount from the value of the real estate at the time of notification, that is, the 'settlement money', can the creditor acquire ownership (article 4, paragraphs 1 and 2 of the Registration Security Act).

Even if it is recognized that there is no settlement money because the value of the real estate is less than the claim amount, the creditor must still notify the debtor of that fact (article 3, paragraph 1 of the Registration Security Act).

Overview of the case

To raise the payment for an apartment, the client (plaintiff) borrowed hundreds of millions of Korean won from the defendant (creditor) and, at the same time, entered into a 'transfer for security agreement' providing the apartment to be purchased as collateral.

Later, when the client failed to repay the debt, the defendant exercised the security right and completed the registration of transfer of ownership of the apartment. Then, the defendant sent the client a notice stating that 'the debt is greater than the value of the apartment, so there is no settlement money to pay.'

Issues in this case

In the notice, the defendant assessed the value of the apartment significantly lower than the market price, and inflated the secured claim amount by excessively calculating groundless interest on the actual principal and duplicating various expenses. As a result, it calculated and notified that there was no settlement money to be paid to the client.

Accordingly, the client came to attorney Joo Youngjae of Saeyeoul Law Firm to resolve the unfairness.

Assistance of attorney Joo Youngjae and outcome of the case

1. Recalculation of the apartment value and secured claim amount based on objective data

Attorney Joo Youngjae meticulously analyzed the problems with the apartment value and the secured claim amount claimed by the defendant.

(Apartment value) He secured actual transaction price data for apartments of the same complex and same size traded closest to the time the notice was served, and proved that the legitimate value of the apartment in question was more than approximately 100,000,000 Korean won higher than the defendant's claim.

(Secured claim amount) He excluded items that were unjustly included, such as interest excessively calculated by applying the maximum interest rate without grounds, and the ownership transfer registration costs that the defendant was contractually obligated to bear, and accurately recalculated the secured claim amount based on statutes and facts.

2. Filing a lawsuit for payment of settlement money and decision in lieu of conciliation

Based on the accurately calculated apartment value and secured claim amount, attorney Joo Youngjae argued that the defendant was obligated to pay the client approximately 140,000,000 Korean won in settlement money and filed a 'lawsuit for payment of settlement money'.

During the proceedings, attorney Joo Youngjae's logical arguments and clear evidence were accepted, and the court issued a decision in lieu of conciliation stating that 'the defendant shall pay 105,000,000 Korean won to the plaintiff (client).'

The defendant raised no objection, so the decision was confirmed as is, and the client was able to protect his valuable property rights and receive more than 100,000,000 Korean won in settlement money.

Conclusion

Just because ownership of the real estate was transferred to the creditor under a transfer for security contract does not mean that all rights must be abandoned. The Registration Security Act clearly stipulates the creditor's obligation to pay settlement money to protect the debtor's rights.

If the creditor unjustly lowers the value of the real estate or inflates the debt and does not pay the legitimate settlement money, it is necessary to respond promptly with the help of legal experts.

Attorney Joo Youngjae of Saeyeoul Law Firm provides optimal legal solutions tailored to the client's situation based on extensive experience in real estate and money-related lawsuits. If you are experiencing difficulties with transfer for security or settlement money issues, do not hesitate to consult to protect your valuable property rights.